Dotcom Bubble

During the early and mid-nineties, the internet was beginning to work gradually its way into the commercial market. The emergence of the internet into the commercial space marked a very important era. In this period starting post-1995 till 2000, the internet spawned an umpteen number of new start-ups and fuelled the surging stock prices of many new as well as existing companies. This culminated in the famous (or infamous) “bubble burst” in March 2000 when the NASDAQ composite index took a deep dive and plummeted to around 1100 from over 5000 marking the start of a mini-recession. Companies went bankrupt, fortunes were lost, and it was quite evident that the bubble had popped.

The advent of the internet changed the commercial landscape of the late nineties and its effects on the market started to become visible from 1995. During 1995 to 1999, new ”dot-com” companies were sprouting up almost every passing day. Some of the existing players, by just adding an “E” as the prefix to the brand name or tag, were able to drive the stock prices heads and shoulders above their usual trading rates. Many people, including investors and venture capitalists, considered the incredible growth of the internet as a new opportunity. Coupled with the low-interest rate on loans at that time which meant more liquidity at the disposal of aspiring entrepreneurs, this oozing confidence helped the bubble to grow at a rapid pace. During the boom era, many start-ups which did not even have a clear vision of what they wanted to achieve and how they planned to do it, received millions of dollars from investors and were encouraged to scale up. The boom part of this typical boom-bust cycle reached a peak during late-1999 to early-2000 when NASDAQ composite index broke the 5000 barrier.

The situation turned ugly quite rapidly from March 2000 onwards. Most of the “dot-com” companies reported lacklustre results, and many of them filed for bankruptcy. The confidence of investors was hit hard, and the situation quickly escalated. During the period from March 2000 to October 2002, the NASDAQ composite index plunged from 5000 to nearly 1000. The turn of events wreaked havoc in the stock market as investors lost almost 5 trillion USD. Jobs were gone, fortunes were squandered, and companies went out of business throwing the American economy out of track.

It was very clear post 2002 that the economy was facing its worst disaster in decades. However, many companies survived the bubble burst, and a few companies like Amazon and eBay even thrived to become corporate giants. Although the greater share of the “dot-com” companies went out of business, a significant number were able to survive the catastrophe. The economic disaster of the early 2000s caused by the bubble burst resulted in huge financial losses. Yet, it clearly demonstrated the dangers of rapid but unsustainable growth and the devastating effect this could have on an economy.

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